diff --git a/binder/src/main/java/io/grpc/binder/internal/BinderClientTransport.java b/binder/src/main/java/io/grpc/binder/internal/BinderClientTransport.java
index 54d65936fab..fae22848f7c 100644
--- a/binder/src/main/java/io/grpc/binder/internal/BinderClientTransport.java
+++ b/binder/src/main/java/io/grpc/binder/internal/BinderClientTransport.java
@@ -25,6 +25,8 @@
 import android.os.IBinder;
 import android.os.Parcel;
 import android.os.Process;
+
+import com.google.common.base.Preconditions;
 import com.google.common.base.Ticker;
 import com.google.common.util.concurrent.FutureCallback;
 import com.google.common.util.concurrent.Futures;
@@ -57,7 +59,9 @@
 import io.grpc.internal.StatsTraceContext;
 import java.util.concurrent.Executor;
 import java.util.concurrent.ScheduledFuture;
+import java.util.concurrent.atomic.AtomicBoolean;
 import java.util.concurrent.atomic.AtomicInteger;
+
 import javax.annotation.Nullable;
 import javax.annotation.concurrent.ThreadSafe;
 
@@ -75,6 +79,12 @@ public final class BinderClientTransport extends BinderTransport
   /** Number of ongoing calls which keep this transport "in-use". */
   private final AtomicInteger numInUseStreams;
 
+  /** Last in-use state that was reported to the listener */
+  private final AtomicBoolean listenerInUse;
+
+  /** Synchronizes transport listener callbacks */
+  private final Object listenerNotifyLock;
+
   private final long readyTimeoutMillis;
   private final PingTracker pingTracker;
   private final boolean preAuthorizeServer;
@@ -114,7 +124,10 @@ public BinderClientTransport(
     Boolean preAuthServerOverride = options.getEagAttributes().get(PRE_AUTH_SERVER_OVERRIDE);
     this.preAuthorizeServer =
         preAuthServerOverride != null ? preAuthServerOverride : factory.preAuthorizeServers;
-    numInUseStreams = new AtomicInteger();
+    this.numInUseStreams = new AtomicInteger();
+    this.listenerInUse = new AtomicBoolean();
+    this.listenerNotifyLock = new Object();
+
     pingTracker = new PingTracker(Ticker.systemTicker(), (id) -> sendPing(id));
 
     serviceBinding =
@@ -259,9 +272,7 @@ public synchronized ClientStream newStream(
       return newFailingClientStream(failure, attributes, headers, tracers);
     }
 
-    if (inbound.countsForInUse() && numInUseStreams.getAndIncrement() == 0) {
-      clientTransportListener.transportInUse(true);
-    }
+    updateInUseStreamsCountIfNeeded(inbound.countsForInUse(), 1);
     Outbound.ClientOutbound outbound =
         new Outbound.ClientOutbound(this, callId, method, headers, statsTraceContext);
     if (method.getType().clientSendsOneMessage()) {
@@ -273,9 +284,7 @@ public synchronized ClientStream newStream(
 
   @Override
   protected void unregisterInbound(Inbound<?> inbound) {
-    if (inbound.countsForInUse() && numInUseStreams.decrementAndGet() == 0) {
-      clientTransportListener.transportInUse(false);
-    }
+    updateInUseStreamsCountIfNeeded(inbound.countsForInUse(), -1);
     super.unregisterInbound(inbound);
   }
 
@@ -306,6 +315,7 @@ void notifyShutdown(Status status) {
   @GuardedBy("this")
   void notifyTerminated() {
     if (numInUseStreams.getAndSet(0) > 0) {
+      listenerInUse.set(false);
       clientTransportListener.transportInUse(false);
     }
     if (readyTimeoutFuture != null) {
@@ -391,6 +401,63 @@ private synchronized void handleAuthResult(Throwable t) {
         Status.INTERNAL.withDescription("Could not evaluate SecurityPolicy").withCause(t), true);
   }
 
+  /**
+   * Updates in-use stream count and notifies listener only on transitions between 0 and >0, without
+   * acquiring the transport lock.
+   */
+  private void updateInUseStreamsCountIfNeeded(boolean countsForInUse, int delta) {
+    Preconditions.checkArgument(delta == -1 || delta == 1, "stream count delta must be -1 or +1");
+    if (!countsForInUse) {
+      return;
+    }
+    int prev, next;
+
+    if (delta > 0) {
+      next = numInUseStreams.incrementAndGet();
+      prev = next - 1;
+    } else {
+      prev = numInUseStreams.get();
+      int updated;
+
+      while (true) {
+        int current = prev;
+        int newValue = current > 0 ? current - 1 : 0;
+        if (numInUseStreams.compareAndSet(current, newValue)) {
+          updated = newValue;
+          break;
+        }
+        prev = numInUseStreams.get();
+      }
+      next = updated;
+    }
+
+    boolean prevInUse = prev > 0;
+    boolean nextInUse = next > 0;
+
+    if (prevInUse != nextInUse) {
+      if (listenerInUse.compareAndSet(prevInUse, nextInUse)) {
+        scheduleTransportInUseNotification(nextInUse);
+      }
+    }
+  }
+
+  private void scheduleTransportInUseNotification(final boolean inUse) {
+    getScheduledExecutorService()
+        .execute(
+            new Runnable() {
+              @Override
+              public void run() {
+                // Provide external synchronization as required by Listener contract,
+                // without taking the transport lock to avoid potential deadlocks.
+                synchronized (listenerNotifyLock) {
+                  if (listenerInUse.get() == inUse) {
+                    clientTransportListener.transportInUse(inUse);
+                  }
+                }
+              }
+            });
+  }
+
   @GuardedBy("this")
   @Override
   protected void handlePingResponse(Parcel parcel) {